Secreted molecules encoded by the Hedgehog (Hh) gene family have been recognized as key signals in regulating the growth and patterning of invertebrate and vertebrate embryos. Mutations in Shh genes encoding Shh signaling components have been associated with many clinical disorders found in humans including holoprosencephaly and various forms of cancer. One of the most salient features of Hh ligands is the ability to act as a classical morphogen in developing tissues. This is particularly evident in the developing vertebrate limbs, where Shh, normally expressed in the posterior limb margin of the zone of polarizing activity (ZPA), has ability to progressively specify increase in number of digits with more posterior identities in a dose-dependent manner. Previously, our studies identified the requirements of Shh in both growth and patterning of the skeletal elements of the limb. Additionally, we showed that this requirement is necessarily mediated by regulation of Gli3 processing. In this context, Shh secreted from the ZPA inhibits Gli3 processing into its repressor form (GN3R), hence promoting the accumulation of full-length GN3 protein (Gli3- FL or GH3-190), which can function as a transcriptional activator (GN3A) within the range of Shh signaling, thus, the relative balance between GN3A and GN3R likely plays a critical role in mediating the limb patterning function of Shh. Major gaps remain in understanding how the Shh activity gradient is regulated to generate defined patterns in the limb. Addressing this question requires a better understanding of factors affecting Shh movement, ligand-receptor interaction, patterning effects of paracrine activity, and transcriptional activity of effectors in the responsive tissue. Therefore, our proposed studies are aimed primarily at providing a better understanding of how Shh signaling is regulated and interpreted during limb development by addressing (1) the role of cholesterol moiety in regulating Shh movement/spatial range in a mammalian tissue environment, (2) the contribution of local and paracrine signaling in generating a complex pattern of digits, (3) the biological function of different forms of Gli3 in regulating tissue patterning. We believe this knowledge will be directly relevant to the role of Shh in human organogenesis, disease and cancer. [unreadable] [unreadable] [unreadable]